November 22, 2018
Raising Your Credit Score to Lock In a Good Interest Rate for Your First Mortgage
It may be the most well-known fact of property lending that the rates at which lenders are willing to lock in mortgages is strongly dependent on the credit score of the applicants. Indeed, this is the case for lending in general. And while credit scores can be mysterious to many, there are certain actions one can take to get that number up to a level that increases one’s chances of being considered a good risk for a lender, and therefore capable of attaining the best rate among those available. This can be particularly key for first-time buyers, who do not have the benefit of previous home ownership working in their favor.
A borrower’s credit score should be above sub-prime if there is to be any chance at all of getting a loan, certainly a decent one in which equity will build—and really, many lenders won’t go for less than a score of 660.
How to get it higher, if you’re hoping to buy your first home? Here are a few actions to consider.
- Pay Your Bills on Time—According to FICO, the lion’s share of your credit report (35%) is based on your timely credit payment history.
- Settle Old Debts—When you’ve got debts outstanding that have been reported, it is always a good idea to resolve them. Furthermore, it can be a good idea to contact the creditor and get from them in writing that they guarantee to report the removal of the debt to the credit score agencies. They may be unwilling to make such a guarantee, but a chance to settle a debt can at times be enough incentive for them to do so.
- Pore Over Your Credit Report—There are ways to dispute negative marks on your report that you believe may have been incorrectly attributed to you. This would include incorrect reports of late payment, and (in this age of identity theft) the existence of any accounts that may not in fact belong to you. Moreover, any negative item on your credit report must be verifiable. If the creditors cannot provide proof that you have defaulted in any way, they are required to help fix your credit report by removing the erroneous and unproveable information.
Once a borrower has raised that credit score to a respectable number worthy of a manageable mortgage rate and located that just-right home, they will want to feel secure they are receiving clear title at closing. That’s where we come in. At Topouzis & Associates, P.C., we do everything we can to be absolutely sure our clients are conveying and purchasing title clear of judgments and defects. And, yes, we help our clients put into place a good policy of title insurance to make certain they don’t get surprised by any nasty lurking issues with a property whose title went through foreclosure. Contact us if you’d like us to do this for you.